The world is entering a new era of big government

“KEEP YOUR eye on one thing and one thing only: how much government is spending,” Milton Friedman once said. Today his eyes would be popping. Governments have spent $17trn on the pandemic, including loans and guarantees, for a combined total of 16% of global GDP. On current forecasts, government spending will be greater as a share of GDP in 2026 than it was in 2006 in every major advanced economy. America is about to put $1.8trn into expanding its welfare state; Europe is doling out a €750bn ($850bn) investment fund; and Japan is promising a “new capitalism”, with even more government largesse.

In the coming decades the state’s economic footprint will expand yet further. Four-fifths of the world economy is now subject to a net-zero emissions target, a goal that in Britain is projected to raise the government-debt-to-GDP ratio by 21 percentage points by 2050 as the state subsidises decarbonisation and growth slows. And many countries have ageing populations that will demand vastly more spending on health care and pensions.